When in Doubt Write it Out: Modifying, Cancelling, Revoking or Rescinding a Contract Subject to the Statute of Frauds

Contracts

When entering into a contract, parties always have to ask themselves whether the contract must be written down and signed. Under the Georgia Statute of Frauds, contracts for (1) marriage; (2) sale of real property; (3) guaranteeing another’s debts; (4) terms of longer than one-year; (5) sale of goods for more than $500; (6) executor or other estate representative, promising to pay damages out of his/her own estate; (7) reviving a debt after the passage of the statute of limitations; and (8) commitment to lend money, must be in a writing and signed by the party to be charged therewith. O.C.G.A. §§ 13-5-30(a); 11-2-201. Until recently, there was a question as to whether parties had to write and sign modifications, alterations, revocations, rescissions, and cancellations of contracts that are subject to the statute of frauds. Over the last year or so, the Georgia Court of Appeals and the Georgia legislature have answered that question for us.

On March 15, 2018, the Georgia Court of Appeals held in Crop Production Services, Inc. v. Moye that “a writing is not necessary where parties mutually agree to cancel an executory guarantee subject to the statute of frauds.”[1] Meaning, that a contract that has not yet been acted upon, can be discharged by an oral mutual agreement between the parties, even when the underlying contract was required to be written down and signed. Id. The Court of Appeals found that all unperformed duties of an enforceable contract—regardless of the statute of frauds, with the possible exception of land contracts—can be discharged by oral agreement.[2]

The Georgia legislature responded and overruled the court in the following legislative session. Four Senators proposed a bill on January 29, 2019 to amend O.C.G.A. § 13-5-30 by adding subsection (b), effective July 1, 2019, to expressly require that “any agreement to modify, alter, cancel, revoke or rescind a promise, contract, agreement, or commitment” subject to the statute of frauds, must be done in a signed writing.[3] The Bill expressly states that it is in response “to the holdings in Crop Production Services, Inc. v. Moye, 345 Ga. App. 228 (March 15. 2018),” leaving no question that the legislature was overruling the Moye decision.

If you are attempting to modify, revoke, rescind, alter or cancel a contract for (1) marriage; (2) sale of real property; (3) guaranteeing another’s debts; (4) terms of longer than one-year; (5) sale of goods for more than $500; (6) executor, or the like, promising to pay damages out of his/her own estate; (7) reviving a debt after the passage of the statute of limitations; and (8) commitment to lend money, you must do so in a signed writing. A court cannot find that a contract of this type was modified, altered, revoked, rescinded, or cancelled based upon an oral promise. So when in doubt, write it out.

[1] Crop Production Services, Inc. v. Moye, 345 Ga. App. 228, 232 (2018)

[2] Id. at 234 (citing Restatement (Second) of Contracts § 148 (1981).

[3] Sen. B. 37, 155th Gen. Assemb., Reg. Sess. (Ga. 2019).

Share via
Copy link
Powered by Social Snap